Agencies clarify ECOA rules on immigration and credit policies

"For decades, ECOA regulations have permitted lenders to consider a borrower's lawful residence status and other information necessary to protect their rights and remedies with respect to repayment, CFPB acting director Russell Vought said in a statement.According to the agencies, ECOA and Regulation B permit creditors to consider immigration or citizenship status as pertinent elements of creditworthiness and information necessary to protect creditor rights and remedies."

"According to the agencies, ECOA and Regulation B permit creditors to consider immigration or citizenship status as pertinent elements of creditworthiness and information necessary to protect creditor rights and remedies. Lenders may legitimately consider immigration status in several circumstances, including to manage financial risk and comply with other legal requirements. The agencies also said the withdrawal was intended to address any misimpression that the joint statement interpreted 42 U.S.C. 1981 as creating liability beyond what courts have already recognized."

Federal agencies shifted to a narrower, statute-based interpretation of the Equal Credit Opportunity Act (ECOA) to clarify that merely considering immigration status does not automatically trigger fair lending violations. ECOA regulations have long permitted lenders to consider a borrower's lawful residence status and other information necessary to protect repayment rights and remedies. ECOA and Regulation B allow creditors to treat immigration or citizenship status as relevant to creditworthiness and to protect creditor rights. Lenders may consider immigration status to manage financial risk and to comply with other legal requirements. The withdrawal of the prior joint statement aims to avoid implying broader liability under 42 U.S.C. 1981 and to prevent unnecessary compliance burdens.

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